Rounding error

Good news!  Canada's unemployment rate edged down to 7 percent in August!

Bad news! The number of people employed rose by only 200 in the month, well within the rounding error of survey data like this.  The only reason the unemployment rate fell was that the number of people actively looking for work fell.  The labour force participation rate slipped to 65.9 percent, its lowest level since 2001.

The gap between the robust jobs growth in the US and the anemic performance in Canada is becoming more embarrassing by the month, but there's not much that policymakers can do about it. Monetary policy is already about as loose as it can get, prompting mounting fears over a both housing bubble and a rise in inflation. Fiscal policy could certainly take up some of the slack, were it not for the fact that the Harper government is counting on unveiling a raft of tax cuts in nest spring's budget in order to bribe Canadians to re-elect them later in the year.

The economy's problems are primarily structural, not cyclical.  The manufacturing sector, which in past business cycles could have been counted on to expand strongly in response to the kind of US growth we've seen in recent quarters,  has been largely hollowed out by a combination of free trade and an overvalued exchange rate.  Nothing else has emerged to fill the gap.

To the extent that the Harper government is doing anything at all about the economy, it's only making things worse, at least at the margin.  The much-vaunted free trade deal with the EU promises further pain for what's left of the manufacturing sector, and could hurt agriculture too, if the Europeans get their way and obtain greater access to Canadian dairy markets. (We may soon see the downside of the quota system that has cossetted Canadian dairy producers over the years). Agriculture is also set to be hit by the sanctions Russia has just imposed in response to Canada's bizarre megaphone "diplomacy" over the Ukraine crisis.*

Remember when Canada could brag that its economy had weathered the financial crisis better than the rest of the G7? Those days are long gone.

* Reacting to pork producers' concern over the loss of the lucrative Russian market, the government responded that foreign policy could not be determined only by business interests.  No indeed -- it's determined by partisan political considerations, as the Tories troll for the votes of the 1.5 million Canadians of Ukrainian origin.